As of July 2013, 21 states are pursuing duals demonstrations through CMS’ Financial Alignment Demonstration project, down from 26 states that originally submitted proposals. Six states are planning to implement demonstrations in 2013, and the remaining states are planning for implementation in 2014.

To date, 15 states, including major population states California, Illinois, New York, and Texas, are pursuing a capitated financial alignment model, which entails a three-way contract between CMS, the state, and participating plans. The capitated model combines a prospective blended payment from Medicare and Medicaid for all primary, acute, behavioral health, and long-term care services, with target aggregate savings for both states and the Federal government. Four states are pursuing a managed fee for service (MFFS) model, which involves an agreement between CMS and the state that builds on the existing FFS delivery system. Two states are pursuing both models.

An Avalere analysis of state demonstration proposals found that as of July 2013, 2 million of the roughly 7 million full benefit duals are eligible for demonstrations. Enrollment in the capitated model could reach 1.7 million and the MFFS model could see approximately 229,000 enrollees. California accounts for approximately 25 percent of the projected enrollment in capitated models. Plans participating to date represent a mix of Medicaid managed care and Medicare Advantage lives. Massachusetts is the only state with a signed MOU with CMS that plans to implement in 2013 though there is not yet a three-way contract between CMS, Massachusetts and the plans. California, Illinois, Ohio, and Virginia have signed MOUs for their capitated model while Michigan, New York, Texas, and eight other states plan to implement the capitated model in 2014 but have not yet selected plans or signed an MOU.

Overall, implementation of the duals demonstrations is slower than expected and states continue to delay. While participating plans will benefit from passive enrollment, they face uncertainty over Medicare and Medicaid payment rates and implementation challenges at the same time. Passive demo enrollment of dual eligibles will also have implications for both Part D and Medicare Advantage plans as beneficiaries would be dis-enrolled from their current plans and passively enrolled into duals plans.